Using the zebrafish model we describe a previously unrecognized requirement for the transcription factor gata4 controlling embryonic angiogenesis. The development of a vascular plexus in the embryonic tail, the caudal hematopoietic tissue (CHT), fails in embryos depleted of gata4. Rather than forming a normal vascular plexus, the CHT of gata4 morphants remains fused, and cells in the CHT express high levels of osteogenic markers ssp1 and runx1. Definitive progenitors emerge from the hemogenic aortic endothelium, but fail to colonize the poorly vascularized CHT. We also found abnormal patterns and levels for the chemokine sdf1a in gata4 morphants, which was found to be functionally relevant, since the embryos also show defects in development of the lateral line, a mechano-sensory organ system highly dependent on a gradient of sdf1a levels. Reduction of sdf1a levels was sufficient to rescue lateral line development, circulation, and CHT morphology. The result was surprising since neither gata4 nor sdf1a is obviously expressed in the CHT. Therefore, we generated transgenic fish that conditionally express a dominant-negative gata4 isoform, and determined that gata4 function is required during gastrulation, when it is co-expressed with sdf1a in lateral mesoderm. Our study shows that the gata4 gene regulates sdf1a levels during early embryogenesis, which impacts embryonic patterning and subsequently the development of the caudal vascular plexus.